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On the voluntary disclosure of redundant information

Author

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  • Banerjee, Snehal
  • Breon-Drish, Bradyn
  • Kaniel, Ron
  • Kremer, Ilan

Abstract

Why do firms engage in costly, voluntary disclosure of information which is subsumed by a later announcement? We consider a model in which the firm's manager can choose to disclose short-term information which becomes redundant later. When disclosure costs are sufficiently low, the manager discloses even if she only cares about the long-term price of the firm. Intuitively, by disclosing, she causes early investors to trade less aggressively, reducing price informativeness, which in turn increases information acquisition by late investors. The subsequent increase in acquisition more than offsets the initial decrease in price informativeness and, consequently, improves long term prices.

Suggested Citation

  • Banerjee, Snehal & Breon-Drish, Bradyn & Kaniel, Ron & Kremer, Ilan, 2023. "On the voluntary disclosure of redundant information," Journal of Economic Theory, Elsevier, vol. 214(C).
    • Handle: RePEc:eee:jetheo:v:214:y:2023:i:c:s0022053123001394
    DOI: 10.1016/j.jet.2023.105743
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    More about this item

    Keywords

    Costly voluntary disclosure; Information acquisition; Redundant information;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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